Barron's Dissects ETFs and Emerging Markets

Barron's had some interesting stuff on both emerging markets and ETFs.

There was a point counter point about emerging markets with Jim O'Neill from Goldman Sachs as the bull and Richard Bernstein as the bear. First a tip of the hat to O'Neill for making a point I have been making for a while now which is that the term emerging markets is out of date.

It was odd that Barron's did not find another emerging market analyst to make the bear case; Bernstein is more of a strategist and the mutual fund he runs is pretty broad. I took Bernstein's argument to be more of a short term argument and that he thinks emerging markets will lead again in a couple of years or so.

Both pointed to potential issues with inflation in some countries as being problematic, we know that China and Brazil are on the front burner for this issue. Given the global back drop and what appears to be secular problems that are nowhere near being solved for the US, Big Western Europe and Japan the cyclical threats cited in the article about emerging markets are small potatoes. If you are one to trade around cyclical events, of which I am not critical, you need to realize that a downturn is not the same thing as a decade-long roundtrip to nowhere.

The cover story this week was about finding the best yielding ETFs. Unfortunately the article failed to mention that past dividends cannot be counted on in the future. There was a positive mention of client holding iShares TIPS ETF (TIP) because the yield now annualizes out to 4%. TIP is a monthly pay but there have been quite a few months where there has been no payout.

I also thought Murray Coleman's piece on what he called hedge fund strategies was useful although I would have included the Index IQ Multi Strategy Tracker ETF (QAI) which in the context of absolute return has done very well.

An entire portfolio of alternatives would turn out to be a dreadful longterm mistake but as a tool for managing volatility over the course of an entire stock market cycle a modest allocation has been very important before and will be in the future. It is well worth your time understanding the space an incorporating them in from time to time.

We saw this three axled thing in town the other night. I've seen them before of course, very neat looking.

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